Risk Analysis Components
A risk analysis is a crucial step that cannot be neglected or poorly organized. With the help of this kind of analysis, the main threats and hazards can be identified and categorized in accordance with their severity, possibility, consequences, etc. It is very important to document all components of risk analysis, explain the necessity of such type of work, and underline the importance of each solution made and every idea presented. A successful risk analysis has to be open, applied, and clear. There are three main components of the majority of risk analyses: assessment, management, and communication. Each component consists of specific steps that should be taken. Assessment is about such processes like identification, characterization, and exposure assessment. Risk management is the evaluation and implementation of the options and the review of the situation before and after the improvements. And risk communication is the way of how the exchange of information is organized.
As soon as the main risks are identified, it is necessary to categorize them and quantify accordingly to think about the most appropriate solutions to try to improve the situation and avoid the most stressful outcomes and challenges for the project.
Brief Risk Identification and Description
The current project is based on the necessity to resurface a 2,100-square-foot driveway with new asphalt. The project manager has to predict the possible resurfacing challenges (both expected and unexpected) in order to gather information and choose the most appropriate options. The previous project helps to identify the following risks: weather conditions, uncertainty about the equipment being delivered in time, possible poor quality of the chosen material for asphalt, poorly removed old driveway, unstable physical conditions of the employees, and unexpected financial costs. In general, there are six main risks with their own components and methods for solution. All of them have to be properly managed to benefit with the opportunities available as soon as the project is finished. A chance to improve a parking place, decrease the chances of car damage, promote a good look of the territory, stop a possible destructions of the driveway, and use a new driveway for a variety of reasons are the main stimuli to underline the importance of risk management and support the development of a comprehensive quality management program (Lemelin, 2011).
Risk Categorization and Quantification
Rules and properly developed working principles have to be taken into consideration while managing risks and promoting an effective implementation of the ideas. Every successful manager has to develop a strong framework on the basis of which all risks can be categorized and explained. As a rule, such factors like not clear objectives of a project, ineffective communication, or insufficient business demand analysis predetermine a further development of risky situations in a project (Wan & Liang, 2012). In fact, road upgrading is a complex activity that is characterized by the risks of different quality and with different consequences (Mouratidis & Papageorgiou, 2010). Some people cannot even guess how crucial the identification of each step and each associated risk can be. The following categorization can be applied to the project under analysis where a manager has to resurface an old driveway and use the necessary techniques to place new asphalt.
- Risks may be project-based and product-based depending on the nature and the outcomes of the risks identified;
- Risks can be internal and external depending on the project manager’s control and its effects on a project (Kerzner, 2009);
- Risks can be identified as technical, the ones related to the way of how technological changes can influence the process;
- Risks may be environmental and not dependent on people and their solutions made in regards to a project;
- Risks may be categorized as legal due to changes within licenses or lawsuits that influence the performance of the process.
The six risks identified earlier can be categorized accordingly.
This categorization shows that the nature of the risks inherent to the project under consideration varies considerably. It helps to identify the main threats and the spheres in which they can be developed. According to the nature of the risk, it is possible to clear up how each threat influences different aspects of the project in general. The following table can help to distinguish risks to several points.
This table is a symbolic connection between all identified risks and the factors that may bother a manager of such project. A manager can define the importance of each risk with the help of such table and clear up the risk that is more important for consideration and for developing some “backup” plans to overcome the possible challenges during the work.
Risk Quantification
Risk quantification is an important process that aims at evaluating the identified risks, defining the level of their severity, and developing several options about what can be done about the majority of them. To quantify risk means to define the importance of each risk identified. The quantification is a means to understand what types of risks may need more time to be solved and to choose the best solution options. In other words, it is necessary to define the level of severity of each risk and combine the results into one project to determine the dependence of the risks. In this project, the severity will be measured as very high, high, medium, low, very low.
*Weather conditions are quantified as a medium level because a manager has to consult a weather forecast company to make sure the period of completing the work is during the appropriate weather conditions. Still, there is a risk of unexpected rain that has to be considered and certain options on how to postpone the work and meet the deadlines have to be developed.
Financial costs are identified as a high-level risk because, as a rule, it is unexpected. A manager has to create an additional financial source to be sure to continue resurfacing a territory. Asphalt poor quality is defined as a high risk because it is hard for a manager to predict if the chosen material is appropriate for the chosen territory. Weather conditions turn out to be a medium-level risk because it can or cannot be that rain or poor weather conditions spoil the work done. Other risks are defined as low and very low because they are expected and can be improved if a manager makes the necessary preparations beforehand.
Conclusion
In this project, all the risks are categorized and quantified accordingly. There are certain expected and unexpected risks with different levels of severity. The quantification of the risks helps to understand the measures and actions that have to be taken in regards to a particular risk. It is not enough to know what risks are possible in the project. It is more important and effective to categorize them and know what can be done about a particular situation. Any project has at least one risk. Even if the risk is not too high, it has to be solved not to promote the development of new challenges or to worsen the already achieved results.
References
Kerzner, H. (2009). Project management: A systems approach to planning, scheduling, and controlling. Hoboken, NJ: John Wiley & Sons.
Lemelin, J. (2011). Maximum flexibility-minimum risk: Risk Management for your project. Policy & Practice, 69(4), 30+.
Mouratidis, A. & Papageorgiou, G. (2010). A rational approach for optimization of road upgrading. Canadian Journal of Civil Engineering, 37, 1462-1470.
Wan, J. & Liang, L. (2012). Risk management of IT service management project implementation with killer assumptions. Technology and Investment, 3(1), 48-55.